Tax Alert
July 2013
Tax Alert
A focus on topical tax issues – July 2013
In this issue
A taxing holiday:
mixed-use assets update
Thin capitalisation
proposals. It ain’t law yet
– thankfully.
Deloitte Private: Putting
the customer first
Proposed GST changes a
step closer to enactment
Exporting goods to
related parties in
Australia? Be aware of
changes to the approach
by the Australian
Customs and Border
Protection Service
Further accolades for
Deloitte’s New Zealand
tax team
September tax bill
reported back
A taxing holiday:
mixed-use assets update
By Ian Fay and Saralaya Frost
Since these changes were first announced, some fine
tuning has been recommended by Officials to soften the
impact of the proposed rules in response to submissions
made to the Finance and Expenditure Committee. The
key changes to note are:
The long weekend away at your mixed-use holiday
home may no longer be as relaxing as it once was with
the proposed mixed-use assets rules being one step
closer to law. The pain might be even worse if there is a
mixed-use boat moored there or if you jetted there on a
mixed-use aircraft.
• The scope of what will fall into the mixed-use assets
rules has been narrowed to only include land (and
improvements – namely holiday homes and baches)
and boats and aircraft (with a cost of more than
$50,000).
Under the soon to be “old” rules, current practice is for
taxpayers to claim deductions for expenses incurred
in relation to assets which are used for both a private
and business purpose for the periods when the assets
are available for the income earning activity, regardless
of whether they are actually used. This has meant
that significant deductions are claimed for expenses
in relation to assets that are mainly used for private
purposes, which has spurred the Government into
action to make a change.
The “new” rules move away from the available for
income earning activity concept. Instead deductions
will be based on how much the asset was used to earn
income relative to total days used.
• Probably most beneficial to taxpayers is a proposed
transitional period for boats and aircraft in order to
give owners a chance to shift these assets out of
complex structures. The consession proposed at
this stage is to remove any tax liability that would
arise from depreciation recovery when an asset is
sold or deemed to be sold for more than book value
but less than cost. Under the concession, when the
assets are transferred to shareholders in proportion
to their shareholding they will be deemed to transfer
at tax book value for depreciation purposes (but
not for deemed dividend purposes). Taxpayers
will likely have until the start of their 2015 income
year to make this transfer to take advantage of the
concession.
Continued on page 2...
Tax Alert
July 2013
• Asset owners are able to opt out of the rules if the
asset earns less than $4,000 in a year – up from a
previously proposed $1,000. Interestingly though, if
the asset is owned by a company then this option is
not available.
Ian Fay
Partner
+64 (0) 4 470 3579
[email protected]
Saralaya Frost
Associate Director
+64 (0) 4 470 3767
[email protected]
2
• It is proposed that the mixed-use assets rules will
apply to land (and improvements) from the start of
the 2014 income year, which for those with a March
balance date has already commenced. However, the
application to boats and aircraft is from the start of
the 2015 income year, to allow taxpayers to utilise
the transitional period.
• If an asset that was subject to the mixed-use
assets rules is destroyed or damaged and has to be
replaced, as long as the replacement is substantially
the same, any losses that were ring-fenced will
be able to be offset against earnings from the
replacement asset.
• Use by associates is considered private use of an
asset as well as where less than 80% of the market
value rent is received.
• Fringe benefit tax will not apply where the mixed-use
assets rules do – this will avoid any double taxation
on the use of the asset. However, Officials have
rejected submissions that the deemed dividend rule
should also not apply.
In the first draft of the proposed rules, special (very
complex) rules were included to quantify interest
deductions available to companies that hold the
assets subject to the mixed-use assets rules. Taxpayers
lobbied to get the complexity reduced; however, these
submissions were not successful.
The Bill is expected to be enacted later this year.
The “new” rules move away from the
available for income earning activity concept.
Instead deductions will be based on how
much the asset was used to earn income
relative to total days used.
Tax Alert
July 2013
Thin capitalisation
proposals. It ain’t law yet
– thankfully
By Troy Andrews and Sam Mathews
In January 2013, Inland Revenue released an issues
paper on the thin capitalisation rules, suggesting a raft
of changes. Tightening up the thin capitalisation rules
is one way New Zealand can play its part in tackling
the taxation of multi-nationals and the global tax base
erosion and profit-shifting (BEPS) problem. As part of
Budget 2013, the Government announced that it agreed
to these proposals in principle, but acknowledged
that there was detail to work through. As a first
step towards that detail, Inland Revenue published a
consultation document (“Thin capitalisation review:
technical issues”) on 6 June 2013 to comment on
submissions received on the earlier paper and to raise
further points for discussion.
The proposals are not a mere tinkering of the rules.
They have the potential to give rise to significant
changes depending on the structure used. New
industries are likely to become subject to the rules (e.g.
securitisation and private equity owned groups). The
proposals are far reaching, introduce new and uncertain
tax concepts, and could have significant unintended
outcomes. All taxpayers need to review their position
before the legislative process starts as the opportunities
to voice concerns will soon become limited.
Non-resident investors “acting together”
One of the key proposals is to widen the inbound thin
capitalisation rules. The current rules apply to a New
Zealand resident company where a single non-resident
holds an ownership interest of 50% or more or has
control by any other means. The proposal is to also
include companies where non-residents are “acting
together” and hold a combined interest of 50% or more.
The January issues paper proposed that “acting
together” would not be exhaustively defined. In
response to concerns about uncertainty, Officials are
now proposing a more prescriptive definition. The
proposal is that non-resident shareholders will be acting
together if:
• Shareholders (directly or indirectly) hold debt in the
entity in proportion to their equity; or
• A shareholders’ agreement sets out how the entity
should be funded (for an entity with fewer than 25
shareholders); or
• Non-resident shareholders are “effectively coordinated” by a person or group of people, such as
a private equity manager or managers.
On each of these tests, there are points of interest and
potential concern.
Officials believe the proportionality test is appropriate
as it is only likely to occur when there is coordination
between shareholders. There are interesting comments
in the paper about the test being similar to the
substituting debenture rules (under section FA 1).
These comments suggest that where the thin
capitalisation rules did apply then the substituting
debenture rules could be turned off.
The change brings the whole question of the purpose
of the substituting debenture rules into stark reality.
Many commentators have questioned the need for
such rules. Suggesting that the substituting debenture
rules should be turned off when the thin capitalisation
rules apply confirms that they have limited purpose. If
Inland Revenue is only turning these rules off in certain
circumstances, then this does create an unfair bias to
some taxpayers. Under the proposal some taxpayers
would be subject to the substituting debenture rules,
and others wouldn’t, depending upon whether the thin
capitalisation rules apply. Instead, let’s have the full
debate on the purpose of the substituting debenture
rules and whether they should be repealed.
Troy Andrews
Associate Director
+64 (0) 9 303 0729
[email protected]
Sam Mathews
Senior Consultant
+64 (0) 9 303 0746
[email protected]
The shareholder agreement test has been limited from
the initial proposal to only apply where the entity is
not widely held and the agreement ‘sets out how the
entity should be funded’. It is an interesting policy step
that a shareholders agreement is perceived as ‘acting
together’ and is the start of a slippery slope to other
similar tax concepts like the associated persons’ tests.
A shareholders agreement is common practice in many
jurisdictions and we aren’t convinced of the linkage.
Some shareholder agreements provide a mechanism to
resolve disputes or limit the gearing levels of a company.
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Tax Alert
July 2013
It would be ironic if an agreement that limited the debt
funding options could actually be a trigger for the thin
capitalisation rules applying. There are likely to be a
number of grey areas and grey examples in applying this
test as to what constitutes ‘how an entity is funded’.
If Inland Revenue is concerned about shareholder
agreements they should set out the spectrum of possible
agreements, and with clear definitions identify those
they take issue with. Taxpayers need careful definitions
– not legislation against labels.
The third limb of the test is more of a catch all for
private equity groups, where numerous entities (e.g.
partnerships) invest together and are effectively coordinated by a single person or group of people. This
is the key target for Inland Revenue. Inland Revenue
remain concerned with what they view as a threat to
the integrity of the rules. There are still questions that
should be answered, like when should it be tested, and
who can be the ‘person’ (e.g. can the company raising
equity be a coordinator?). Unfortunately, ‘effective
coordination’ is a new tax concept and it will take some
experience and clear examples to be effective.
Despite some positive steps being made, concerns
around the uncertainty of the “acting together” test
and the potential overreach of the rules are likely to
remain under the new proposals. We expect a number
of submissions to be made – again – asking for certainty.
Exclusion of related party debt when calculating
110% safe harbour
The inbound thin capitalisation rules effectively deny
interest deductions to the extent the New Zealand
group’s debt-to-asset ratio exceeds the higher of 60%
and 110% of the entities worldwide group debt-toasset ratio.
The January paper proposed that shareholder linked
debt should be excluded from an entity’s worldwide
group ratio. What constitutes ‘a shareholder link’ is
again likely to be a new tax concept which taxpayers will
need to understand how to apply. The proposal sets out
that debt will be shareholder linked where the lender
has an income interest in the group, or where funds
are provided by the group / shareholder to another
entity for the purpose of providing funds to the group.
There is also discussion around extending this to where
shareholders provide ‘security’ for third party borrowing.
This is complex, and to apply this in practice is probably
impossible for some.
A simple example of a multinational having ‘funding’
from a bank, and that bank’s trading arm holding a
single share in that multinational company, would
require forensic analysis to find. Nonetheless, the paper
suggests that this would be shareholder linked debt.
For some taxpayers, the easier answer will probably be
to ‘never’ rely on the world-wide group ratio – which
doesn’t seem like a good policy outcome.
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Tax Alert
July 2013
Officials have offered an exclusion to the above rule for
listed companies with listed debt (and the shareholder
has a less than 10% interest). Exclusions are welcome,
but if you are a listed company without listed debt, this
won’t apply.
Extension of the rules to trusts
The January paper proposed to extend the thin
capitalisation rules to apply to trusts. This would be
the case where 50% or more of the total settlements
are made by a group of non-residents “acting
together”, or by an entity subject to the inbound thin
capitalisation rules.
In the recent paper, Officials are proposing that the
“acting together” test would remain as described in the
original issues paper (i.e. not exhaustively defined). It’s
not clear exactly how this would be legislated for, and
again there may be lingering uncertainty.
More concerning is the extension of the criteria for
being subject to the rules. Officials are proposing
that the thin capitalisation rules will apply to the
trust if the person that has the power to appoint or
remove trustees is a non-resident or within section
FE 2 (i.e. subject to the thin capitalisation rules) or if
50% of settlements are made by such a person. The
concern is that the reference to section FE 2 extends
this to the outbound thin capitalisation rules too. An
example of our concern is demonstrated by a New
Zealand individual that holds an interest in a CFC or FIF
(controlled foreign company, or Foreign Investment Fund
– which applies the attributed FIF income method), who
is also the appointer / settlor of a family trust that holds
New Zealand rental properties (100% leveraged by the
bank and the individual). The current rules would likely
disallow a significant amount of interest deduction in
the trust. Hopefully this is not the policy intention and
enough examples are thought through and highlighted
to Inland Revenue to ensure that this isn’t their policy
target. If it is their target, then there are bigger issues to
grapple with – and hopefully we get the opportunity of
another consultation paper!
A natural reaction to the January paper was concern
over its applicability to the securitisation industry.
Officials considered these comments and responded
with confirmation that a securitisation trust should be
within these rules. No doubt, submissions will again
be made for there to be an exemption. However, if
this is not successful some consideration needs to be
given to ensuring that the rules work appropriately for
these trusts. There are lots of securitisation trust assets
that should benefit from the on-lending concession.
However, as a number of assets won’t fall within this
concession (e.g. in the money hedging instruments and
trade receivables / rental strips) – this is likely to be a real
issue for financial institutions to work through.
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Tax Alert
July 2013
The proposal is that when the thin capitalisation rules
apply to trusts, that trust (in itself) will be both the
New Zealand group and the worldwide group. In
testing the worldwide group debt percentage, the
‘shareholder linked debt’ issue that was discussed above
for companies is wider for trusts – all associated party
debt is excluded. This has implications for securitisation
trusts where the originator provides a credit enhancing
subordinated loan. Or in the example above with the
individual’s rental property trust – that individual’s loan
to the trust would fall out. A better approach may be
to extend the rules to apply to trusts – only for settlors /
appointers that are within the inbound thin capitalisation
rules – and when the rules do apply, group the trust with
that inbound thin capitalisation group.
Other proposals
Two of the other proposed amendments are also briefly
mentioned in the paper:
1. The proposal to discount an asset’s value where
interest is capitalised (and a deduction has been
taken for tax purposes) has been slightly modified to
only apply to non-fair valued assets.
2. The inability to obtain an uplift in an asset value
arising from an internal reorganisation was also
mentioned – but only to dismiss submissions and
confirm the view that this rule should go ahead.
It is disappointing to see that Officials have not
backed down on these proposals. Departing from
the accounting treatment is a major change for the
thin capitalisation rules and is likely to greatly increase
compliance costs for affected taxpayers. The accounting
values were originally designed to be the proxy for
determining what an arm’s length lender would lend
to the entity. If Inland Revenue wish to whittle the
accounting values down the whole basis for the safe
harbour comes into question.
The paper is also silent on the last proposal that
New Zealand resident individuals or trustees will
be required to consolidate with the holdings
of their underlying outbound groups. We
presume that this will be going ahead.
6
Concluding remarks
The purpose of the June paper was to respond
to a number of submissions made on the January
consultation paper. There has not been a substantial
movement in what is being proposed and the devil will
be in the detail.
These are complex proposals and will mean that some
taxpayers could face landslide changes that they should
be turning their mind to. There may be limited action
that they can undertake to stop the policy momentum
(and the response timetable is very short). We would
suggest focussing on making sure that the policy limits
are tested and understood.
Hopefully the proposed law will be presented in a
way that is able to be applied – rather than resulting
in the abandonment of legitimate concessions (i.e.
the worldwide group debt percentage). There will
also be new industries (like securitisation) that are
suddenly faced with having to fit their structure into
thin capitalisation rules. Going forward this should be
doable – but the real question is where is the discussion
on transitional rules?
The paper is silent on how current structures will be
reflected in the rules. If Inland Revenue expect taxpayers
to look back and unpick decades of transactions to
test for capitalised interest, or internal reorganisations
– then the next round of submissions could be quite
animated. No doubt with the backdrop of the BEPS as
the underlying reason for these changes, Officials may
feel very bullish about these proposals as there is the
need for New Zealand to be seen to be making changes
in this space. Let’s hope they listen to common sense in
the process.
The consultation paper seeks feedback by 28 June and
can be accessed here. It is likely that Inland Revenue
will accept late submissions.
If you have any questions regarding the proposals,
please contact your usual Deloitte adviser.
Tax Alert
July 2013
and make it simpler to do business with us. We have put
our private clients and family businesses front and centre
through creating a dedicated Private team. And we
are focusing on the areas where we were told support
was needed -- coming up with innovative solutions to
everyday business challenges, navigating technological
change and advising companies about the best ways to
go global.
Deloitte Private: Putting
the customer first
By Cassandra Worrall
So with Kiwi businesses as our focal point, we’ve also
created a dedicated Deloitte Private website –
www.deloitteprivate.co.nz. Its design makes it easier
to tap into our collective expertise and connect with
individuals from our Private team.
Thanks to the levelling effect of the cloud and related
technology, New Zealand businesses have more
opportunities to grow and reach more people in more
places. This digital-social revolution has had a profound
impact on the way businesses communicate with their
customers. Most importantly, the customer remains
‘front and centre’ in the business relationship and savvy
Kiwi companies are taking notice, taking chances and
achieving success.
Still, Deloitte Private is more than just a new look and
feel. It’s a shift in the culture and values of a large part
of our business in direct response to the customer. And
with a network of over 240 professionals around the
country, we are endeavouring to remain focused on the
needs of New Zealand SMEs, but with the experience,
expertise and connections of a truly global organisation
and all the technological innovation that goes with it.
Cassandra Worrall
Marketing &
Communications
+64 (0) 9 303 0750
[email protected]
With so many opportunities, locally and overseas, now
available to start ups and growing businesses the future
is looking bright for New Zealand’s burgeoning SME
sector. Proof is our Deloitte Fast 50 index which has
become a barometer of success for New Zealand’s
fast-growing businesses.
However, despite our experience in this sector, feedback
from private businesses was they viewed Deloitte as too
corporate to be relevant to them. So earlier this year,
with the help of digital brand agency, Aamplify, we
decided to do some more formal research, the results of
which confirmed this earlier feedback.
Some private businesses saw the Deloitte brand as
‘aloof’ and were worried that we didn’t have the
flexibility to meet the unique needs of growing Kiwi
businesses. Sure, Deloitte’s expertise was recognised,
but they wanted a service that was more personal and
accessible. They wanted to talk to a real person and not
a corporation.
Launched last month, Deloitte Private is our response.
We have realigned parts of our internal structure to
remove barriers commonly associated with a large firm
7
Tax Alert
July 2013
Proposed GST changes a
step closer to enactment
By Vlad Skibunov
Vlad Skibunov
Manager
+64 (0) 9 303 0808
[email protected]
On 7 June 2013, the Finance and Expenditure
Committee reported back to Parliament on the Taxation
(Livestock Valuation, Asset Expenditure, and Remedial
Matters) Bill (“the Bill”), introduced on 13 September
2012. Among other things, the Bill proposes GST
changes which will have far-reaching implications to
both New Zealand resident and non-resident businesses.
GST refunds for non-residents
One of the major GST amendments proposed by the Bill
concerns the ability of non-resident businesses to claim
GST incurred on goods and services acquired in New
Zealand. This is a fundamental and positive change for
non-residents. Under the current rules, in order to claim
GST on goods and services acquired in New Zealand,
a person must be registered for GST and must use the
goods or services for, or have them available for use
in, making taxable supplies in New Zealand. This last
requirement often acts as a barrier for claiming GST
deductions by non-residents who incur GST costs while in
New Zealand, but who do not actually make any taxable
supplies in New Zealand. An example of where this may
arise is a non-resident business sending its employees to a
conference or training course in New Zealand.
In contrast to New Zealand rules, many foreign GST
jurisdictions, e.g. the European Union member states,
provide for a mechanism that allows non-resident
businesses to obtain a refund for GST incurred. The
New Zealand Government has recognised that current
limitations on the ability of non-resident businesses to
claim GST refunds on costs incurred in New Zealand
may reduce the competitiveness of New Zealand service
providers and jeopardise their ability to attract overseas
commercial customers. As such, the proposals in the Bill
are aimed to make it easier for non-residents to obtain
New Zealand GST refunds.
In summary, a non-resident business will be able
to register with Inland Revenue for a “special GST
registration” regime and claim GST refunds if:
• The non-resident is not carrying on or intending to
carry on a taxable activity in New Zealand.
• The non-resident is registered for a consumption tax
in its own jurisdiction, or, if their jurisdiction does
not have a consumption tax is carrying on a taxable
activity that would render them liable to register for
GST in New Zealand if the taxable activity was carried
out in New Zealand.
• The amount of the non-resident’s input tax in the
first period is likely to be more than $500.
• The non-resident’s taxable activity does not involve
performance of services which will be likely to be
received in New Zealand by a person who is not
registered for GST.
The special GST registration regime will only apply to
non-resident businesses that do not carry on a taxable
activity in New Zealand. Non-resident businesses that
do carry on a taxable activity in New Zealand will still be
able to register for GST and claim GST deductions under
the normal GST registration rules.
Once Inland Revenue receives the GST return under
the special GST registration regime, it will have 90
working days to issue a refund of GST or request
further information. This is different from the typical
requirement to issue a GST refund within 15 working
days and will act as a revenue protection measure.
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Tax Alert
July 2013
In the original version of the Bill, the proposed legislation
contained an outright prohibition for any non-resident
business to register with a New Zealand resident
business as a GST group. Following a number of
opposing submissions to the Finance and Expenditure
Committee, including from Deloitte, objecting to
such drastic change (GST grouping with New Zealand
residents is often used by non-resident businesses to
reduce their compliance costs and provide certainty as
to the GST treatment of their supplies), the reportedback version of the Bill removed the outright prohibition
on the GST group registration between residents and
non-residents. However, to register with a resident as
a GST group, the non-resident must be registered for
GST under the normal GST registration rules rather than
under the proposed special GST registration regime.
Under the new rules, the Commissioner will be able
to deregister the non-resident if she considers that
requirements for the GST registrations are no longer met.
Deloitte recognises the importance of business to
business (B2B) neutrality, and is supportive of the
proposed reforms to remove the existing barrier to GST
refunds which will help encourage non-residents to
undertake business with New Zealand businesses. We
expect that the proposed changes should have a positive
fiscal impact given the economic benefits of attracting
more business to New Zealand.
The new non-resident GST registration rules will apply
from 1 April 2014.
An opt-out provision to agency rules
Currently, the GST Act only allows one tax invoice to
be issued when an agent supplies goods or services
on behalf of a principal supplier. Often, however,
accounting systems automatically issue invoices when
goods and services are supplied, which may technically
result in a breach of the GST legislation. The Bill
proposes to allow principal suppliers and their agents
to opt out of the agency rules in the GST Act and
individually issue a tax invoice in relation to what will be
treated as two separate supplies – that is, a supply from
the principal supplier to the agent, and from the agent
to the customer.
Deloitte welcomes the proposal to allow principals
and agents to opt out of the agency rules. We note,
however, that the proposed rules will only apply to
suppliers and their agents. We have a number of clients
that act as buyers’ agents for their customers and which
experience the same concerns. We have already notified
Inland Revenue regarding the inconsistency and will be
looking to work together with them with the view of
expanding the proposed rules to buyers’ agents.
The new agency rules will apply from the date of
enactment.
Mixed use assets
Claims for income tax and GST deductions on purchases
of goods and services which may be used for both
private and income-earning purposes (such as holiday
houses, boats and aircrafts) are becoming subject to
much greater scrutiny from Inland Revenue before they
are being approved. Specifically, Inland Revenue is often
concerned that deductions are being over-claimed in
respect of what in essence is a private asset.
A significant part of the Bill is concerned with the
introduction of the new income tax rules ( see feature
article) and the corresponding GST rules in respect of
claiming deductions for land, boats and aircraft. The
Bill provides a formula which will need to be used in
order to calculate the extent to which deductions will
be available. In respect of GST deductions, we expect
that following the enactment of the new rules we
will see much greater level of reluctance for the GST
refunds to be paid out by Inland Revenue in respect of
holiday houses, boats and aircraft. As such, to increase
the likelihood of a GST deduction being approved,
businesses must be prepared to provide substantive
evidence of the proposed business use of an asset.
Next steps
The Bill is expected to be enacted in the next few
months. We recommend that businesses consider these
and the other proposals in the Bill and consider whether
they may apply to their circumstances.
Please contact your usual advisor to discuss your tax
position.
9
Tax Alert
July 2013
Jeanne du Buisson
Associate Director
+64 (0) 9 303 0805
[email protected]
Exporting goods to
related parties in
Australia? Be aware of
changes to the approach
by the Australian
Customs and Border
Protection Service
By Jeanne du Buisson
The Australian Customs and Border Protection Service
(“Customs and Border Protection”) have recently
released its revised Practice Statement which deals
with valuation advice in respect of goods imported
into Australia between related parties with particular
emphasis on transfer pricing adjustments. While it
is recommended that valuation advice be obtained
by importers who import from related parties, it is a
requirement that valuation advice be obtained where
there is a retrospective transfer pricing adjustment. This
updated Practice Statement applies from 1 April 2013
and is relevant to all businesses that export goods to
related parties in Australia.
The Practice Statement also notes the approach
that Customs and Border Protection will take when
reviewing these transactions. In particular it outlines the
procedural and documentary requirements for obtaining
valuation advice. Valuation advice issued by Customs
and Border Protection provides certainty to the importer
that the transfer price of the goods meets the customs
value requirements, and the valuation advice is valid
for five years from the date of issue. The application of
the Practice Statement is onerous on importers where
the imported goods are subject to retrospective transfer
pricing adjustments. We have highlighted below some
of the material implications for importers, either where
valuation advice is sought/obtained upfront or where
valuation advice is not obtained but the importer is
subject to a Customs and Border Protection audit.
Customs and Border Protection will require that:
• Adjustments to the customs value be made to each
import declaration line and within the range advised
in the valuation advice;
• Composite transfer pricing adjustments should be
deconstructed as to demonstrate what proportion of
the relevant transfer pricing adjustment relates to the
imported goods;
• There must be an actual transfer of funds relating to
the adjustments; and
• Any transfer pricing study is consistent with Customs
and Border Protection’s valuation methodologies, that
is, a transaction based approach and not a profit split.
Why is valuation advice important for Customs
where goods are subject to transfer pricing?
The purpose of valuation advice is to ensure that the
valuation method, and therefore the price of the goods
which forms the basis of the customs value, is correct. If
the customs value of the imported goods is correct, then
the correct amount of Customs duty and GST will likely
be paid on these imported goods.
Valuation advice is recommended for importers of
goods into Australia who import from a related party
and is required when there is a retrospective transfer
pricing adjustment which affects the custom value of
previous imports.
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Tax Alert
July 2013
The Practice Statement increases the evidentiary burden
on importers who apply for valuation advice, particularly
if the goods are subject to retrospective transfer pricing
adjustments. The importer must demonstrate that the
price of the imported goods was made at arm’s length,
and that the relationship between the purchaser and
the vendor did not influence the price of the goods. An
importer can demonstrate this by means of a “test values”
test or a “circumstances surrounding the sales” test.
It is important to note that this Practice Statement could
potentially affect the Customs duty payable by the
importer.
If you are in the business of exporting goods into
Australia to a related party then you should consider
the new statement and how your transfer pricing
agreements or adjustments between you and the
related party could impact on the Customs value of the
imported goods.
We know that NZ Customs is aware of the Australian
Practice Statement and is still considering their approach
from a New Zealand perspective. To date the practice
of NZ Customs has been more lenient than that now
prescribed for Australia.
Our indirect tax specialists are available to discuss the
impact of this revised Practice Statement and any issues
your business may have in relation to customs duty
treatment of related-party importers.
Further accolades for
Deloitte’s New Zealand
tax team
Deloitte tax partner and indirect tax leader Allan Bullot
has been recognised by International Tax Review as a
leading GST specialist in New Zealand. This is according
to their latest international guide to Indirect Tax Leaders.
International Tax Review notes that governments around
the world are increasingly relying on indirect taxation like
GST and VAT to make up for decreasing revenue from
direct taxation. They further state:
Allan Bullôt
Partner
+64 (0) 9 303 0732
[email protected]
“While taxpayers generally welcome the shift from direct
to indirect taxation, it carries with it its own compliance
costs and issues to navigate such as exemptions,
reduced and zero rates, market distortions, place of
taxation and measures to tackle fraud.”
This sentiment is certainly in line with the current tax
environment in New Zealand. Inland Revenue now have
greater expectations on businesses to have formal GST
policies and procedures in place, including the need for
reconciliations and regular GST reviews. As with all these
types of Inland Revenue review questions, it is always
easier to put GST policies in place at a time of your
choosing, rather than as a hasty response in advance of
an impending Inland Revenue visit.
Allan’s recognition is the latest in a string of international
accolades for Deloitte New Zealand’s tax team, including
dominating the latest New Zealand list in the Euromoney
Guide to the World’s Leading Tax Advisers and an
impressive showing in the 2012 Asia Women in Business
Law Awards.
Please get in touch with your Deloitte GST team member
contact if you need assistance on any GST risk related
issues you may have.
11
Tax Alert
July 2013
September tax bill
reported back
On 6 June 2013, the Finance and Expenditure
Committee reported back on the Taxation (Livestock
Valuation, Assets Expenditure and Remedial Matters) Bill
that was first introduced into the house in September
2012. This is the bill that contains the mixed-use
assets reforms and the GST cross-border business-tobusiness neutrality changes (see article on these changes
elsewhere in this issue).
This is also the bill that had the FBT on car park
proposals (i.e. salary trade off proposals) tacked on
to it via a supplementary order paper introduced in
December 2012 and on which the Government backtracked earlier this year. These are gone from the bill,
save an amendment to clarify that vouchers provided
by charities to employees will be a form of a shortterm charge facility and subject to FBT over a certain
threshold. Other measures included in the bill include:
• Amendments to change the way lease inducements
and lease surrender payments are taxed (reported
on in our December 2012 Special Tax Alert).
No significant changes are proposed other than
minor technical amendments to clarify application
of the rules.
• Changes to the rules to prevent a taxpayer
from electing to treat certain excepted financial
arrangements as financial arrangements.
• Correcting the mismatch in the tax treatment of fair
dividend rate foreign currency hedges.
• Reducing the time period for claiming refunds to
four years from the end of the year in which an
assessment is made.
• Clarification of the definition of dividend to exclude
share splits, rights issues and premiums paid under
bookbuild arrangements.
• Repeal of the transitional imputation penalty tax.
• A remedial amendment to the associated persons
rules to ensure a trustee is not “associated with”
a person who holds the power of appointment or
removal in their professional capacity only and who is
not eligible to benefit under the trust.
At the time of writing this article, the bill had yet to have
its second reading and so enactment may still be some
time away.
TM
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Queries or comments
regarding Alert can be
directed to the editor,
Veronica Harley,
ph +64 (9) 303 0968,
email address:
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